The National Energy Board is considering forcing oil companies to drill a secondary relief well in any deepwater Arctic exploration project, as part of a review of its regulations following BP Gulf of Mexico blowout.
Ottawa is set to issue new exploration licences for the Beaufort Sea in an auction that closes next week. But before companies can begin drilling, the federal regulator must decide on the regulations governing relief wells, which are the last defence for killing blowouts.
BP has been drilling its first relief well for the past two months as of today, and is still several weeks away from completing the operation, as crude continues to gush into the ocean, causing massive environmental damage along the coast.
Aiming at a 25-centimetre-wide hole some 5.5 kilometres beneath the drill ship, BP engineers are coming ever closer to intersecting with the rogue Macondo well and snuffing it out. But the process has been agonizingly slow.
Meanwhile, work is a few days ahead of schedule on two relief wells that BP says are the best chance at stopping the leak, BP America spokesman Daren Beaudo said.
But the company is sticking with its early-to-mid-August time-frame for completing the wells because of the uncertainties of hurricane season and the precision needed as the drills get deeper into the ocean floor.
Rough seas in the Gulf of Mexico are also delaying BP's efforts to connect a vessel to the leaking Macondo well that will double the amount of crude being captured amid the worst U.S. oil spill.
The link may be postponed for a couple of days while vessel owner Helix Energy Solutions Group Inc. waits for calmer seas, Bryan Ferguson, a spokesman for London-based BP, said Sunday from Houston.
Some environmentalists and politicians in both Canada and the United States argue that oil companies that are drilling in deep water should be required to start a backup well so that it doesn't take three months to finish a relief well in the event of a blowout.
But regulators for the Gulf of Mexico and offshore Atlantic Canada appear unlikely to adopt such a costly approach, noting that the drilling of a second well also increases the risks of accidents.
In the Arctic, however, it's a different story.
Oil companies are eager to begin drilling existing prospects in the deep water of the Beaufort Sea as early as 2014. As well, the Department of Indian and Northern Development, which manages Arctic development, has called for bids on new exploration acreage that includes deep-water locations hundreds of kilometres offshore. Results of that auction should be announced later this month.
But before they can drill, companies will have to persuade the National Energy Board that they could complete a relief well in the same season as they begin their initial drilling, a policy that aims to ensure a blowout doesn't result in crude gushing for months under the sea ice.
Prior to the BP blowout, the board was preparing to review that policy as companies argued it would was virtually impossible to achieve, given the shortness of the drilling season in the North. Imperial Oil Ltd., Chevron Corp., ConocoPhillips Co. and BP itself all argued for a relaxation of the same-season relief-well rule.
Now, the board is reviewing its entire approach to offshore drilling. But chairman Gaetan Caron has indicated the relief well remains a fundamental part of ensuring companies can respond to blowouts which - while unlikely to occur - could be even more catastrophic in the Arctic than in the Gulf of Mexico.
"The relief well is the best known method so far, when things have gone wrong and are out of control," he told a recent Senate committee hearing. "We have to be on standby, ready to start drilling it as soon as possible."
The federal regulator noted that there is now an open debate about whether the industry should be forced to drill the relief well at the same time as the main one.
"These are important questions that need to be answered," he said. "We believe the public review will be a good place to discuss this and to provide elements of answers based on science and people's acceptance of risks."
Mr. Caron - along with the heads of the Canada-Newfoundland and Labrador Offshore Petroleum Board and the Canada-Nova Scotia Offshore Petroleum Board - denied reports that the regulators were prepared to ditch the relief-well requirement under new draft rules that were introduced last December.
The new guidelines are meant to be less prescriptive and detailed than older rules in order to give companies flexibility in how they meet safety and environmental goals. But critics say they represent a relaxation of rules, and do not specifically require companies to have drill ships on standby for relief wells.
However, Mr. Caron said the companies will still have to demonstrate to regulators the capacity to respond to blowouts, and that includes the ability to quickly begin drilling relief wells.
Chevron is drilling in the ultradeep water of the Orphan Basin off Newfoundland. It is operating under the old regulations, which required it to specify what drill rigs would be available, and estimate how long it would take to get them on site.
Sean Kelly, a spokesman for the Canada-Newfoundland board, said the new guidelines are only draft rules, and the regulators must still determine whether specific guidelines are needed for relief wells.
Premier Danny Williams has already rejected proposals to require companies to drill simultaneous relief wells, saying such an approach would be too costly and would chase investment away from his province. A deep water well can cost as much as $200-million to complete.
In the United States, some environmentalists and members of Congress are calling for rules requiring simultaneous relief wells, but neither the U.S. House of Representatives nor the Senate appear to back such calls.
"It's ridiculous, totally ridiculous. I can see wanting to have the capability to drill a relief well in a timely way, that's certainly understandable," said Elmer Danenberger, a former senior official with the Minerals Management Service, which regulates the U.S. offshore.
"But the idea of drilling concurrently another well that would be used as a relief well - that poses all kinds of additional risks, environmental threats and everything else."
Mr. Danenberger said any offshore well poses risks of blowouts. He also said it would be virtually impossible for a company to aim a relief well at an exploration hole until the original well is completed.